The rating incorporates the conservative capital structure of STML that has facilitated the institution in maintaining sound financial profile over the years and tide through cyclical downturns. With high earnings retention ratio, leverage was below 1(x) at year-end; even though capital expenditure undertaken by the company in the past two years has been substantial. There are plans to take up additional long-term loans in FY13; the same is not expected to have a material impact on the capital structure of the company. Cash flow position of the company has also remained comfortable and debt servicing capacity is considered strong.

Even though STML is amongst the leading players in the composite textile sector; compared to some larger players, company’s share in value-added segment is low. While yarn remains a major contributor to company’s sales, share of fabric and home-textiles has increased over time. Going forward, the company plans to increase sale of fabric and home-textiles through capacity expansion, along with some growth in yarn capacity. Moreover, forward integration into finishing is planned which will be utilized for lawn fabric and home-textiles. Further expansion in value-added sector, as planned, may provide diversification benefits to STML.

STML has interests in various group companies including textile related concerns, power generation and dairy. In the case of Sapphire Dairies Limited, equity injection to the tune of Rs. 150m has been approved by STML’s Board. The investment portfolio of STML also comprises holdings in listed blue chip stocks with healthy dividend yields.

For further information on this rating announcement, please contact the Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311872.

Jamal Abbas ZaidiDeputy CEO

________________________________________________________________________________________________________________________________
Information herein was obtained from sources believed to be accurate and reliable; however,
JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy
or completeness of any information and is not responsible for any errors or omissions or for
the results obtained from the use of such information. JCR-VIS, the analysts involved in the
rating process and members of its rating committee do not have any conflict of interest
relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its
credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments.
This rating/ranking is an opinion and is not a recommendation to buy or sell any securities.
Copyright
2013
JCR-VIS Credit Rating Company Limited. All rights reserved.
Contents may be used by news media with credit to JCR-VIS.